T-Mobile US Promotion Attacks Tablet Segment of the Market

Not content to battle for phone accounts, T-Mobile US now has launched a promotion aimed at snaring more tablet accounts. 

T-Mobile, starting September 3, 2014, will allow any Simple Choice customer to add a tablet to a postpaid Simple Choice phone plan for $10 per month. 

T-Mobile US also will match the customer's 4G Long Term Evolution data plan, up to 5 GB a month.

For example, a customer with a Simple Choice smartphone plan with 5 GB of LTE data can add a tablet with another 5 GB of data set aside for use on that tablet, for just $10 per month.

That particular promotion is significant because, in recent quarters, all four leading U.S. mobile carriers have added net new accounts on the strength of tablet activations.

T-Mobile US, meanwhile, arguably has had the lowest amount of activity in that regard. 

So the tablet promotion serves two purposes, bringing T-Mobile US up to parity with tablet adds by the other three leading carriers, and also helping T-Mobile US maintain its net new customer momentum, since growth now is driven by tablet connections.

T-Mobile US has lead net addtiions since the first quarter of 2013, though both Verizon and AT&T have gained as well. Sprint and the mobile virtual network operators have lost customers. 


source: Telco 2.0

How Widespread will Gigabit Competition Be?

Gigabit networks now have become the value-price umbrella under which Internet service providers in a growing number of communities must operate. 

To be sure, not every neighborhood will have access to one or more providers, nor is it clear that demand is present in every neighborhood of every city. 

In all likelihood, supply will tend to be deployed where there is expected demand. 

Some might worry that there will not be competition in many, or most markets. 

Some of us would bet there will ultimately be two or more ISPs offering such service in most markets where major cable and telco ISPs compete head to head.

Where cable and telco ISPs face each other as direct competitors, it seems logical that, over time, contestants will try and maintain parity, at least, with the key competitor. 

That doesn't always mean gigabit access. In many neighborhoods, 100 Mbps or 300 Mbps might match demand characteristics better. But in such neighborhoods, many of us still would bet there will be a minimum of two providers.

The big difference in future markets is that satellite ISPs and fixed wireless ISPs will not be able to match the 300 Mbps to 1 Gbps speeds, and will have to concentrate on segments of the market uninterested in buying the faster services. 

This diagram by Gigaom illustrates the current state of affairs. 

TV Drives Deutsche Telekom Fixed Network Results

Fiber to cabinet investments in the German market remain difficult to justify on tradtional return on investment grounds, but appear to be strategic, nonetheless.

Deutsche Telekom argues it is “investing more in our home market than any other European incumbent,” according to Timotheus Höttges, Deutsche Telekom Chairman of management board chairman and CEO.

As part of that investment, Deutsche Telekom has bumped Long Term Evolution coverage to 77 percent of potential customers and fiber to the home coverage to 39 percent of households.

Deutsche Telekom expects it will cover 45 percent of homes with fiber facilities by the end of 2014, as well.

But financial results in the second quarter illustrate how difficult it is to justify the return on investment from fiber to home facilities, even when they are deemed necessary.

In the second quarter of 2014, overall Deutsche Telekom revenues fell 0.3 percent year-over-year.

Deutsche Telekom did report organic revenue growth of about 0.6 percent, mainly on the strength of the U.S. operations.

Adjusted EBITDA also increased 0.3 percent, largely driven by U.S. results, though operating cost reductions in Deutsche Telekom European markets also helped.

Deutsche Telekom says it gained 227,000 net new additions, of which 119,000 came from its own retail business. In total, the German service provider has almost two million fiber customers on our German network.

Broadband net adds totaled 7,000 in the quarter. But video accounts made possible by the high speed access investments, might be the bigger story.

Broadband revenues actually declined three percent year-on-year, despite TV revenue growth of 8.4 percent.

Deutsche Telekom added 63,000 net new video entertainment customers in the quarter.

Importantly, Deutsche Telekom says, 53,000 of those new customers came on the new upgraded fiber access networks.

Overall fixed network revenues declined by 1.2 percent year over year, while voice revenues were down 6.7 percent.

The point is that high speed access investments are important principally because they enable TV revenue. “Where we build VDSL, we see a higher uptake of customers,” said Höttges.

“So this is, I think, absolutely the support for our strategy for the huge investments which we're doing in the infrastructure,” Höttges said.

Part of the upside comes from the ability to sell faster high speed access connections, to compete with cable TV company offers, and partly to sell higher-price access packages.

But video entertainment arguably offers the bigger revenue opportunity. Deutsche Telekom has gained about 400,000 retail fiber customers, year over year, and 240,000 TV customers.

But high speed access revenues have dropped, year over year, while Deutsche Telekom also lost a net 69,000 high speed access customers.

TV revenues, on the other hand,  have grown, year over year.

The point is that the return on investment for fiber facilities (either fiber to home or fiber to cabinet) remaining a difficult proposition. It increasingly seems to be the case that telcos must, in many instances, invest in fiber to the home for strategic reasons, even if the traditional return on investment might be lower than for other investments.

Deutsche Telekom High Speed Access and Video Entertainment Revenues	Q2 2013	Q3 2013	Q4 2013	Q1 2014	Q2 2014
Retail broadband customers ('000)	12,430	12,383	12,360	12,354	12,361
Retail fiber customers ('000)	1,096	1,165	1,246	1,375	1,494
Broadband TV customers ('000)	2,078	2,121	2,177	2,255	2,318
Broadband revenues (millions)	€1,075	€1,065	€1,057	€1,046	€1,042
TV revenues (millions)	€239	€241	€244	€251	€259
Source: Deutsche Telekom

U.S. Mobile Marketing War Might Last Another Year or Two

Once started, mobile marketing wars tend to gain momentum, at least for a while. The issue is how the structure of the U.S. mobile market might have changed, in perhaps a year or two, when the current war has ended.

In fact, as recently as the start of 2014, it would still have been possible to hear observers claim there was no price war going on in the U.S. market.

Even Verizon Wireless, normally loathe to engage in promotional efforts, has done so since Sprint started a new price attack of its own in the U.S. mobile market.

That is because the U.S. mobile marketing war might be depressing Verizon Wireless net new customer additions, suggesting that the T-Mobile US price attack has begun to poach accounts from carriers other than AT&T or Sprint.

Up until the first quarter of 2014, it was not so clear that the T-Mobile US growth was clearly coming at the expense of AT&T or Verizon. That might be changing.

In the second quarter, T-Mobile US booked virtually all net new prepaid account growth in the U.S. market, for example.

So it is that T-Mobile US has countered a Sprint promotion, which countered a T-Mobile US moves. The latest move by T-Mobile US is a new 2 GB increase in Long Term Evolution usage buckets for customers of “Simple Starter” plans.

T-Mobile US now provides “Simple Starter” plan customers to quadruple their data to a full 2 GB of LTE data, for just $5 per month. That plan was launched in May 2014 as an entry-level solution with unlimited talk and text, and 500 MB of LTE data for just $40.  

Starting September 3, 2014, Simple Starter customers can get 2 GB of LTE data for only $5 extra per month.

The move allows T-Mobile US to improve the value of its entry-level offer.

“Get Verizon’s $50 plan and use just one gig more data, and the price jumps to $65,” argues T-Mobile US CEO John Legere.

On the other hand, no marketing war lasts forever. The issue is what might happen to contestant market share or profitability and revenue, before the marketing war ends.

Study Confirms: People Hate Ads, Would Not Pay to Avoid Them

Few people really enjoy ads, but advertising revenue traditionally allows media to be provided at no incremental cost, or lower cost, than would be the case if consumers paid for the full cost of their media.

Internet advertising saves United Kingdom users $232.24 (£140) a year, according to an analysis by Ebuzzing.

Still, about 98 percent of respondents surveyed on behalf of Ebuzzing also say they would not pay that additional amount to have an “ad-free” experience. That finding is consistent with virtually all surveys that ask consumers whether they would really be willing to pay a substantial amount for an “ad-free” experience.

On the other hand, consumers are adept at avoiding or minimizing ads, so marketers will have to create more engaging forms of advertising, to have an impact, Ebuzzing also suggests. That is about what one would expect an advertising services firm to say, however much the suggestion is logical.

The study, which surveyed a nationally representative group of more than 1,400 UK consumers, revealed 63 percent of web users skip online video ads “as quickly as possible.”

For users 16 to 24, 75 percent do so.

About 26 percent of respondents said they mute their sound, while 20 percent scroll away from the video. Some 16 percent use ad blocking software.

For younger people, the incidence of ad avoidance efforts were higher in all cases.

Respondents were asked what would make them more likely to watch online video ads. Relevance was important. Some 34 percent saying the ad “should be relevant to me” and 20 percent reported “‘being able to select the ad I watch” also was important.

About 38 percent of those respondents 16 to 24 indicated ability to select ads was important.

Some 26 percent suggested ads should be ‘funny or entertaining’ and 21 percent prefer short ads (less than one minute run time). About 16 percent said ads should be relevant to the content being consumed at the time.

The study also found that 77 percent of consumers never upgrade to paid for versions of free mobile apps.

The estimated value of advertising was arrived at by calculating the average value of each Internet user by taking the amount spent on digital advertising in the U.K. last year - $10.6 billion (£6.4 billion) and dividing it by the number of Internet users in the country (45 million).

Smartphone Growth Shifts to Asia, Africa, Latin America

By 2019, the number of smartphone subscribers globally will have grown 2.5 times over the 2012 level, driven primarily by customers in Asia Pacific, the Middle East and Africa (MEA), and Latin America, according to Forrester Research.

These three regions, which are home to 84 percent of the world’s population, will contribute a significant proportion of the next 2.5 billion smartphone subscribers.

Asia Pacific is the fastest-growing region in terms of subscribers with a compound annual growth rate (CAGR) of 14 percent, followed by MEA and Latin America.

As you would guess, introduction of low-cost smartphones is fueling the change in adoption patterns.

Chinese companies such as iocean, JiaYu, Meizu, Xiaomi, and Zopo and Indian players like Karbon and Micromax are flooding the market with sub-$200 Android-based smartphones, Forrester Research notes.

More than 46 percent of mobile subscribers owned a smartphone in 2013, compared with nine percent in 2009. By 2019, Forrester Research expects that 85 percent of all mobile subscribers will have smartphones.

India now is the fastest-growing market for smartphones. Gionee, Huawei, Konka, Lenovo, Xiaomi, and ZTE have recently entered the market, and Google launched its Android One program in partnership with Indian companies to provide sub-$100 Android phones.

Android and iOS have the lead in mobile operating systems, but Windows Phone is picking up, Forrester Research says.

As a direct result, mobile Internet access will drive global 45 percent of total mobile service revenue  in 2014, according to ABI Research.

Service revenue for 2014 will grow three percent to US$1.01 trillion, mainly driven by the robust growth of the mobile Internet market, ABI Research says.

The proportion of Internet access instances originating from mobile devices will vastly outnumber fixed network access, including both fixed networks and Wi-Fi, by 2018, Cisco now forecasts.

Mobile Internet Access Will Drive 45% of Total Mobile Operator Revenue in 2014

Mobile Internet access will drive global 45 percent of total mobile service revenue in 2014, according to ABI Research. In the first quarter of 2014, global mobile service revenue increased 0.58 percent year over year to US$264 billion.

Service revenue for 2014 will grow three percent to US$1.01 trillion, mainly driven by the robust growth of the mobile Internet market, ABI Research says.

The proportion of Internet access instances originating from mobile devices will vastly outnumber fixed network access, including both fixed networks and Wi-Fi, by 2018, Cisco now forecasts.

It is likely that fixed networks still will represent an order of magnitude more total data throughput than mobile networks do, by 2018, according to Ericsson.

By 2018, there will be more than 10 billion mobile-ready devices and connections, about three billion more than there were in 2013, and about five billion global mobile users, up from more than four billion in 2013. Ericsson predicts.

The one region with a revenue issue is Western Europe. Despite global service revenue growth, the Western European market is declining. In the first quarter of 2014 mobile service revenue declined five percent, year over year, despite Internet access revenue growth.

According to ABI Research’s Market Data, the major European carriers such as Vodafone, Telefonica, T-Mobile, and Orange all suffered from gross profit decreases in the first quarter of  2014, whereas in North America mobile carriers are still demonstrating a positive outlook for gross profit.

“Facing continued price pressure driven by the competitive mobile market, mobile carriers have had to take on higher subscriber retention and acquisition costs to support their market positions. This has affected profitability,” said Marina Lu, ABI Research research analyst.